Investment Term Paper

Executive Summary

In the Spring of 2000, Gateway executives had increasingly focused on moving their revenue streams beyond the box, that is, away from a dependence on PC product sales toward PC solutions sales. These solutions include training, content, customer financing, and Internet services. This concentration on growth through diversification comes as a reaction to declining market share and a response to increasing competitive pressure, particularly from market rival Dell. In 2000, Dell and Gateway were the fifth and sixth largest PC-manufacturers in the world, respectively.

The purpose of this paper is to examine Gateway transition from a PC-manufacturer to a solutions provider, provide an overview and analysis of the market situation and the company's hexagon strategy, and observe whether this strategy is sufficient to stem the erosion of their market share and reposition Gateway as a market leader.

Industry Background

The personal computer market is a huge and dynamic industry that is quite possibly the fastest paced industry in the world. Due to the different levels of organization, it I difficult to classify the industry as a whole, however, the existence of a few small firms controlling the market puts the personal computer market in the category of competitive monopoly. There are hundreds, if not more, firms involved in a market that extends from the electronic components used in PCs to the thousands of software titles that make otherwise useless silicon wafers execute miracles to the armies of service workers trying to maintain existing systems. Working independently from each other, these firms provide the user with a completed product that was unthinkable 20 years ago. With the many firms competing in the industry, there are only a few dozen that are constantly acknowledged as major players, and of those only a handful successfully influence the direction of the market.